The Supreme Court has dismissed businessman Gerard McCaughey’s appeal over his US$1 million investment in a fund linked to two New York hotels, leaving in place the High Court order dismissing his claims against Irish Bank Resolution Corporation and Mainland Ventures Corporation.
In a judgment delivered on 13 March 2013, Mr Justice Hardiman said the appeal turned on the High Court’s findings about the omission of a zoning issue from an investment brochure and whether disclosure would have affected Mr McCaughey’s decision. The Supreme Court held that those findings were supported by the evidence and should not be disturbed on appeal.
The fund concerned the Beekman Tower Hotel and Eastgate Tower Hotel in Manhattan. At the time investors were approached in September 2006, the bank had already agreed to buy the hotels. Their certificates of occupancy allowed different levels of residential and transient hotel use, although both properties were operating as transient hotels. The brochure did not mention the zoning issue.
Mr McCaughey argued that the issue had been concealed and that he would not have invested had it been disclosed. The High Court found no fraud or negligence in the brochure’s omission. It also rejected his evidence that disclosure would have deterred him, describing that view as hindsight and wishful thinking rather than deliberate untruth. The trial judge found that the bank’s belief the issue could be resolved was honest and reasonable.
The Supreme Court treated those conclusions, including the finding about Mr McCaughey’s state of mind, as primary findings of fact based on testimony heard at trial. It said the finding that he would have invested regardless of disclosure defeated the causal link required for his non-fraud claims. The court did not revisit the other alleged issues, including renovation costs, sitting tenants and interest-rate strategy, which were not the focus of the appeal.
The High Court had also held that the commitment agreement’s broad clauses limited the claims to fraud. The Supreme Court described their scope as exceptionally broad and questioned whether the clauses had been fairly brought to the investor’s attention, but said it did not need to resolve that question in this case.
The court dismissed the appeal and upheld the High Court order. It did not make a new finding on the broader merits of the hotel project or determine the separate claims of other investors.